The bidder’s statement: sweet nothings need substance

In hostile takeover bids, it’s seen all the time: target company advisers pore over the bidder’s statement, compile a list of complaints, then write to the bidder, threatening to elevate matters to the Takeovers Panel if disclosures are not amended.

This well-traversed strategic shot has just been provided with fresh ammunition. The panel yesterday said it would issue a new guidance note, bolstering the issues over which merger parties can complain about.

Take the bidder’s statement from Asian sugar giant Mitr Phol for
MSF Sugar
, also released yesterday. Discussing the premium, Mitr Phol said its offer was at a 30.9 per cent premium to MSF Sugar’s closing price on November 4 (the day before the offer was made), a 37.8 per cent premium to the one-month volume-weighted average price, a 37.3 per cent premium to the three-month VWAP and so on.

There was no mention that the $4.45 a share bid was at a slight discount to MSF’s closing price of $4.47 on Tuesday, the day before the bidder’s statement was released.

But the panel reckons in the future, there should be. Its draft guidance note released yesterday (feedback will be accepted until February 3) says a statement about a premium could potentially give rise to unacceptable circumstances if the “prices at the most recent practicable date are not included. This would be the date just before the date of the bidder’s statement or target’s statement; or, if the bidder’s statement or target’s statement is subsequently amended, just before printing."

The guidance responds to concerns that without it, retail shareholders – who aren’t able to put their finger on current market prices via the internet – will not be properly informed about deal execution risks, excessive conditions or the likelihood of a contested offer emerging.

The panel is also planning to tighten requirements around post-acquisition disclosure of bidder intentions – a requirement of the Corporations Act but an area where the law is sometimes not observed. There are, of course, good reasons for this: few bidders want to create rods for their backs by revealing their true intentions for a target. Mention potential job cuts and key staff can vanish in an instant.

The new guidance will require bidders to disclose integration plans or directions (“even if imprecise"); management expertise; and the intended dividend policy.

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Pointing to the case of
Northern Energy
, where it sought corrections to an independent expert’s report, the panel said that such reports should be “as clear, concise and effective as possible".

The caveat provides plenty of flexibility for argument. With panel matters drying up after the flurry of association cases in the first half of the year, it seems there will now be a few new avenues for skirmishing.

Three venture capital funds are expected to share in $100 million of federal government funding, but the venture capital industry says it needs a longer-term commitment. Innovation Minister
Kim Carr
announced the third and final tranche of the Innovation Investment Fund, raising the size from an expected $60 million to $100 million. Australian Private Equity and Venture Capital Association chief executive
Katherine Woodthorpe
said the IIF had been vital to commercial ideas, “but a lot more work is needed if we want Australia to capitalise on and retain its innovation for national growth and employment". She called for a commitment of $100 million every second year and said it was time for a review of venture capital.